Pennsylvania Newspaper Association
 

Every so often, a PNA member calls and asks this question on our Legal Hotline:  Who is responsible for paying the newspaper for an ad – the agency that placed it, or the advertiser?

PNA’s for-profit subsidiary, MANSI, deals with this issue all the time, as the bulk of our placements come through advertising agencies.  It’s a critical issue, and one that is often overlooked.  Intuitively, it seems like the answer to the question should be simple.  It’s not. Volumes of legal scholarship exist on this subject, believe it or not.

While written contracts expressly designating liability for payment are preferable, they are rare in the newspaper advertising industry.  THIS DOES NOT MEAN THAT YOU SHOULD NOT TRY AND USE THEM.

A small number of papers require prepayment for all ads.   While this clearly eliminates the collections issue, it raises a number of business issues.  Ad agencies of course balk at this.

In the past, the industry standard was known as “sole liability” whereby the advertising agency would assume all liability for payment of media contracts.  Today, it is the rare advertising agency that will assume sole responsibility for payment of its client’s advertising bills.  And newspapers sometimes find advertising agencies to be an unacceptable credit risk.

Many newspapers prefer holding the advertising agency and the advertiser jointly liable.  This is probably the most rare kind of liability in today’s climate.

More often than not, if there is a written contract, advertising agencies try and disclaim responsibility for payment.  In this case, a newspaper must ensure that it has recourse against the advertiser itself.                  

The AAAA, the advertising industry trade group, has advocated “sequential liability,” which makes advertisers liable for advertising charges unless the advertiser has paid the agency for those charges.  In that case, the agency is responsible.  This of course puts the burden of investigation squarely on media.  Most newspapers, in numbers far exceeding other media entities, have rejected sequential liability.

All that being said, let’s answer the question:  Who is responsible for payment for an ad that was placed by an agency, for which no contract exists and for which the advertiser itself has not provided a guaranty of payment? 

The cases have come out all different ways.  Courts hearing these cases typically examine the totality of circumstances.  Any history of dealing between the agency, the advertiser and the newspaper will be examined.  All faxes, insertion orders and even written notes will also be examined. 

But the bottom line is that without an understanding of how liability is allocated among the parties and a writing, these kinds of cases often end up in litigation.  And that means you are paying lawyers to determine who owes you money and whether you will ever get paid.  We don’t have statistics on the collection rate in these kinds of cases.  But at a minimum, it is an exercise in frustration and expense.

Our advice:  Decide in advance on your newspaper’s policy, have your attorneys create a standard contract and train your advertising staff how to properly complete the contract prior to placement.  The easiest lawsuit to win is the one in which you have a clear contract that has been signed by all parties. 

More questions?

Contact PNA's Legal Hotline at (717) 703-3080.

Click here to visit PNA's online Legal Handbook for Newspapers.